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Decision CRTC 94-286

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Decision

Ottawa, 6 June 1994

Decision CRTC 94-286

Premier Choix: TVEC Inc.

Eastern Canada - 931571400

"Arts et Divertissement" (A&D) service - Approved

Following a Public Hearing in the National Capital Region beginning on 14 February 1994, the Commission approves the application by Premier Choix: TVEC Inc. for a broadcasting licence to carry on a French-language specialty programming undertaking to be called "Arts et Divertissement" (A&D).

This service will be available to cable television affiliates in Eastern Canada, on a modified dual-status basis for Class 1 licensees and on a dual-status basis for Class 2 licensees, as explained in Public Notice CRTC 1994-59, which introduces this and the other decisions issued today, and in accordance with the provisions set out in the distribution and linkage public notice accompanying these decisions (Public Notice CRTC 1994-60).

For the reasons set out below, the Commission will issue a licence expiring on 31 August 1998. The licence will be subject to the conditions stipulated in the appendix to this decision and in the licence to be issued.

Ownership

The applicant company, Premier Choix: TVEC Inc. (PC:TVEC), is the licensee of the pay television undertaking "Super Écran" and the specialty programming undertaking "Le Canal Famille". The principal shareholder of PC:TVEC is 129610 Canada Inc. (56.68%), a wholly owned subsidiary of First Choice Canadian Communications Corporation (First Choice), which in turn is ultimately controlled by members of the Greenberg family of Montréal through the Astral Broadcasting Group. First Choice also holds licences to operate English-language pay television and pay-per-view (PPV)
services.

Nature of the Service

The service proposed by the applicant is modelled on the highly-regarded U.S. satellite service "The Arts and Entertainment Network" (A&E), a service that is very popular in Canada and the United States. Programming will consist of four main elements: documentaries, representing the largest share of the programming schedule; feature films; dramatic series; and the performing arts.

Programming

PC:TVEC stated that its studies and surveys reveal a trend in viewer preferences toward content that is both entertaining and enriching. The applicant found that services offering quality documentaries on a regular basis are rated among the highest in terms of audience appreciation. It suggested that this was confirmed, not only by A&E, with over 50 million subscribers in the U.S. and about 5 million in Canada, but by similar European services, such as "Planète" of France and "Channel Four" of Great Britain.

PC:TVEC emphasized that the A&D programming formula is designed specifically to meet the expectations of Francophone viewers while adding to the richness and diversity of the programming available throughout the Canadian broadcasting system. It added that, as a unique and distinctive service, A&D will provide a real and tangible alternative to existing French-language programming services.

A&D will offer a variety of documentaries, which will occupy the largest portion of the program line-up, particularly during peak viewing hours. The documentaries will be high quality offerings which, as the result of a co-operation agreement with the A&E network, will reflect the expertise and quality criteria of A&E and will be adapted for the Francophone Canadian audience. Additional programming diversity will be provided by inclusion in the service of feature films and drama series of diverse origins, as well as original programs on the performing arts, including theatre, song and comedy. The Commission expects the licensee to devote at least 5% of its program schedule to cultural programs on the performing arts.

Consistent with the application, it is a condition of licence that at least 90% of A&D's programming be dedicated exclusively to programs from the following categories: analysis and interpretation, drama, music and dance other than a music video clip, variety, and human interest. To enhance the distinct nature of the A&D service, documentary programs in the above categories must represent at least 50% of the broadcast day, and no feature films, other than documentaries, may be distributed during the prime time hours of 6:00 p.m. to 11:00 p.m. The Commission further notes the applicant's commitment to distribute documentaries during 75% or more of these prime time hours; it expects the licensee to adhere to this commitment.

In addition, to minimize the impact of this new service on existing broadcasting undertakings, and as discussed at the hearing, it is a condition of licence that A&D distribute no recently-released feature films, that is to say, in the case of each feature film, at least seven years must fall between the year of copyright and the year of exhibition. Moreover, by condition of licence, North American drama series distributed on the service must be restricted to non-recent productions, in order to avoid any direct competition for product between A&D and conventional French-language television broadcasters. In addition, while the licensee may distribute recently-produced drama series originating outside of North America, the Commission expects A&D not to compete with conventional French-language television broadcasters that also seek to acquire such productions.

The applicant proposed an initial Canadian content level of 30%, increasing to 32% in the fourth year of operation; it is a condition of licence that these levels must be maintained at a minimum. At the hearing the applicant stated that it had proposed these relatively low levels because it did not wish to sacrifice quality for the sake of quantity, owing to the high cost of each hour of Canadian content. It went on to say that, in order to deliver the type of relatively expensive programming it proposed, it had to strike a balance between Canadian content levels and Canadian program expenditures. The Commission considers that the Canadian content levels proposed by the applicant are acceptable under the circumstances, given the scarcity and high cost of the main type of programming it plans to distribute. The Commission will review this matter with the licensee at the time of licence renewal.

Regarding expenditures on Canadian programs, it is a condition of licence that PC:TVEC dedicate at least $4,805,000 to the investment in, or acquisition of, Canadian programs between 1 September 1995 to 31 August 1996, the projected first full year of operation. In each subsequent broadcast year, the licensee must devote at least 40% of the gross annual revenues derived from the operation of this service during the preceding year to the investment in, or acquisition of, Canadian programs, subject to the flexibility provisions contained in the relevant condition of licence.

The Commission also notes the applicant's commitment to allocate 50% of its total expenditures on Canadian programs to original programs, that is to say to programs that have not been previously distributed by the licensee of any other broadcasting undertaking. It further notes that the applicant proposes to set aside 10% of its schedule for the distribution of original Canadian programs, programs that will be distributed for the first time by A&D.

As a related matter, but with specific regard to PC:TVEC, the Commission noted earlier in this decision that effective control of this applicant resides with Astral, a film producer and distributor. The Commission expects PC:TVEC, in selecting Canadian programming for distribution on its service, to treat all Canadian producers and distributors on an equitable and non-discriminatory basis, with no preferential treatment being given to the programs produced or distributed by Astral.

The Commission notes that one of the more significant provisions of the agreement allowing A&D to select from among the best programs shown by A&E, is A&E's commitment that all revenues it earns from A&D for such acquired programming will be reinvested in Canada to finance or acquire certified Canadian documentaries. As for the French-language dubbing of programs acquired under this arrangement, the Commission notes that the applicant intends to allocate an average of $1 million a year to dubbing over the course of the licence term; it expects this dubbing to be done in Canada. The Commission further notes A&D's firm plans to enter into agreements for the supply, exchange and co-financing of programs with European services, including Planète, France 2, France 3, Paris Première, Canal Plus, TF1 and France's Institut national de l'audiovisuel. The Commission expects the licensee to ensure that at least 25% of A&D's foreign programming component originates in countries other than the U.S.

The Commission notes the applicant's commitment to distribute 1,116 hours of closed captioned programming for the deaf and hearing impaired during the first year of operation, at a cost of $90,000, and to increase this gradually to a level of 1,527 hours in the fourth year of the licence term, at a cost of $123,000. It also notes A&D's commitment to caption all original Canadian programming produced specifically to meet its needs beginning in the first year of operation and throughout the licence term. The Commission expects the licensee to adhere to its commitments. The Commission also encourages the licensee to increase its hours of captioning and to monitor the captions during exhibition.

Distribution

PC:TVEC proposes to distribute A&D in Eastern Canada, i.e., Ontario, Quebec and the Atlantic provinces. It further proposes that the service be distributed exclusively on a high-penetration discretionary tier and be financed entirely by subscription revenues. It is a condition of licence that the licensee distribute no advertising material except a service identification, the announcement of an upcoming program that is voiced over credits or a promotion for a program other than a Canadian program. The Commission notes in this regard that, following a recent amendment to the Specialty Services Regulations, 1990 (Canada Gazette, Part II, SOR/94-304 published 4 May 1994), certain promotions for Canadian programs are no longer considered to be advertising material.

At the hearing the Commission questioned the applicant about its distribution arrangements in view of the uncertainty they raise in the present circumstances. On the one hand, the Commission notes that cable undertakings in Quebec do not market specialty services on high penetration discretionary tiers. On the other hand, the applicant indicated at the hearing that its business plan and market study, which forecast an average 85% penetration in the Francophone market and a wholesale fee of $0.65 in the first three years of operation and $0.70 in the fourth year, were prepared solely on the basis of the distribution arrangement proposed.

PC:TVEC stated that it had approached some existing French-language specialty services concerning the possibility of offering their services as a package of discretionary services in Quebec. On the strength of their responses, and based upon the statements of some Quebec cable operators at the hearing in this proceeding and at the structural hearing of 1993, the applicant stated it is fully satisfied that a discretionary specialty services tier will soon be available in Quebec.

In accordance with PC:TVEC's application and the distribution arrangements outlined in Public Notice CRTC 1994-60 also issued today, the Commission approves the distribution of A&D on a modified dual status basis for Class 1 licensees and on a dual-status basis for Class 2 licensees. Class 1 licensees who wish to distribute the A&D service must offer it on a discretionary basis unless the licensee and cable undertaking agree to have it distributed on the basic service. Class 2 licensees with more than 2,000 subscribers who wish to distribute A&D will be required to distribute it on the basic service unless the licensee of A&D consents in writing to have it distributed as a discretionary service.

Given the uncertainty in Quebec regarding the availability of a discretionary specialty service tier, and in light of statements made at the hearing indicating that there is no consensus on this point among the major cable undertakings, the Commission has decided to issue a licence for a four-year term only, to permit an early reassessment of the situation. Given the limited term of four years, the Commission has also decided to make it a condition of licence that the licensee charge cable undertakings distributing the A&D service as part of the basic service a maximum monthly wholesale fee of $0.65 for the duration of the licence term.

At the time of renewal, the Commission intends to review the level of Canadian programs distributed by A&D, as well as the issue of subscriber fees. Even though most Class 1 cable undertakings in Quebec may initially distribute A&D on the basic service, should a discretionary specialty service tier become available in Quebec during this licence term, the Commission will expect the licensee to make arrangements with these cable undertakings to have A&D distributed on the discretionary tier, as indicated in its application.

Employment Equity

In Public Notice CRTC 1992-59 of 1 September 1992 entitled "Implementation of an Employment Equity Policy", the Commission indicated its intention to examine broadcasters' practices aimed at achieving employment equity. PC:TVEC indicated in this regard that the corporate policy on employment equity of the Astral Broadcasting Group would be adopted. The Commission encourages the licensee to promote equitable representation among on-air personnel and voice-overs in the programming, promotional messages and public service announcements it produces. The Commission will re-examine these matters at the time of licence renewal.

Premier Choix: TVEC Inc.
Eastern Canada - 931571400

Conclusion

The Commission is satisfied that the A&D service will offer Francophones attractive, high-quality programming that will contribute to the enrichment and diversity of the Canadian broadcasting system. In approving this application, the Commission is satisfied that there is a clear demand for a service such as that proposed, and that the expertise of and resources available to the applicant will ensure its success. The Commission notes in this regard, the performance of PC:TVEC in establishing and operating the specialty programming service, Le Canal Famille.

The Commission has also taken into account the concerns raised in the interventions filed in this proceeding notably by Vidéotron Ltée, the Union des artistes, the Fédération culturelle canadienne-française, and organizations of deaf and hearing-impaired persons.

Allan J. Darling
Secretary General

APPENDIX / ANNEXE

Conditions of Licence for Arts et Divertissement (A&D)

For the purpose of measuring compliance with Conditions of Licence 1, 2 and 3 set out below, the first broadcast year of the licence term will be deemed to commence on 1 September 1994.

1. At least 90 % of the programming provided by Arts et Divertissement (A&D) shall be dedicated exclusively to programs drawn from the following categories as set out in Schedule I to the Specialty Services Regulations, 1990:

Analysis and Interpretation (category 2);

Drama (category 7);

Music and dance other than a music video clip (category 8a);

Variety (category 9); and

Human Interest (category 11).

(2) Documentaries shall account for at least 50% of the broadcast day (program logs must include identification of the documentaries);

(3) Feature films distributed by the licensee, other than documentaries, shall not be recent releases, i.e., seven (7) years must have elapsed between the year of copyright and the year of exhibition (program logs must include identification of these dates);

(4) No feature films, other than documentaries, shall be distributed in prime time (6:00 p.m. to 11:00 p.m.);

(5) North American drama programs (other than subcategory 7d) that are distributed on the service shall be limited exclusively to non-recent productions, that is to say, a minimum of five (5) years must have elapsed between the year of copyright and the year of exhibition (program logs must include identification of these dates).

2. Over the broadcast year, the licensee shall devote at least 30% of its programming to the distribution of Canadian programs during the broadcast day as well as during the evening broadcast period, and these levels shall be increased to at least 32% in the fourth year of operation beginning 1 September 1997.

3. In accordance with the Commission position on Canadian expenditures as set out in Public Notices CRTC 1993-93 and 1993-174, the licensee shall:

(1) Between 1 September 1995 and 31 August 1996, expend at least $4,805,000 on investments in, or acquisitions of, Canadian programs;

(2)In each subsequent year, beginning 1 September 1996, expend at least 40% of its gross annual revenues derived from the operation of this service in the preceding year on the investments in, or acquisition of, Canadian programs;

(3) In the broadcast year commencing 1 September 1995 and in any subsequent year of the licence term, excluding the final year, the licensee may expend an amount on Canadian programming that is up to five percent (5%) less than the minimum required expenditure for that year set out in or calculated in accordance with this condition; in such case, the licensee shall expend in the following year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underspending;

(4) In the broadcast year commencing 1 September 1995 and in any subsequent year of the licence term, including the final year, the licensee may expend an amount on Canadian programming that is greater than the minimum required expenditure for that year set out in or calculated in accordance with this condition; in such case, the licensee may deduct:

(a) from the minimum required expenditure for the following year of the licence term, an amount not exceeding the amount of the previous year's overspending; and

(b) from the minimum required expenditure for any subsequent year of the licence term, an amount not exceeding the difference between the overspending and any amount deducted under paragraph (a) above;

(5) Notwithstanding the above, during the licence term, the licensee shall expend on Canadian programming, at a minimum, the total of the minimum required expenditures set out in or calculated in accordance with the licensee's condition of licence.

4. From the date of commencement of service, the licensee shall charge each exhibitor of this service a maximum wholesale rate of $0.65 per subscriber per month for distribution on the basic service.

5. The licensee shall distribute no advertising material, more specifically, any advertisement intended to sell or promote goods, services, natural resources or activities and includes any advertisement that mentions or displays in a list of prizes the name of the person selling or promoting these goods, services, natural resources or activities, with the exception of:

a) a service (A&D) identification,

b) the announcement of an upcoming program that is voiced over credits, or

c) a promotion for a program other than a Canadian program.

6. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", as amended from time to time and approved by the Commission.

7. The licensee shall adhere to the guidelines on the depiction of violence in television programming set out in the CAB's Voluntary Code Regarding Violence in Television Programming, as amended from time to time and approved by the Commission.

For the purpose of these conditions:

all time periods shall be reckoned according to the eastern time zone;

"broadcast day" means the period of up to 24 consecutive hours, beginning each day not earlier than six o'clock in the morning;

"broadcast year" means the total number of hours devoted by the licensee to broadcasting during the aggregate of the broadcast months in a 12-month period, beginning on 1 September in any year;

"evening broadcast period" shall have the meaning as set out in subsection 4(2) of the Television Broadcasting Regulations, 1987.